Chain-of-title is important in today’s real estate market, whereas in the past it wasn’t, here is why:
In the past (Before 2002) people use to buy and hold onto properties for a few years and eventually sell the property.
Because of all of the flippers and fraud that happened in the real estate market over the last 6 years lenders lost a lot of money and needed to figure out ways to protect themselves.  They found that some scam artists would buy a house for $30,000 one day, appraise it for $60,000 and sell it the same day for $30,000 more, then sell it again for $90,000 the next day.  This was done with appraisal fraud and the lenders ended up getting a house back with a $90,000 loan on it that was worth $30,000.  This was happening in many areas in the United States.  Certain markets experienced this more than others.  The term “flip” or “flipper” eventually got a bad name.  Buying a house for cheap, fixing it and reselling it for more money, which is flipping is not actually  illegal, it’s when you hide one of the “owners” in the “chain-of-title” from the lender, or you use appraisal fraud. In today’s market, at the time of this writing, new FHA loans are looking for a minimum of 90 days of seasoning, A-credit lenders may go down to 6 months of seasoning, and most lenders require a minimum of 12 months of seasoning these days.  What is seasoning you ask?  Seasoning is how long 1 owner has been on title and the duration they have owned that property.  For example if a buyer bought a house in January of 2007 and closed the loan and was ready to close the loan with a new buyer January 2008, that new buyers lender may require 1 year of seasoning, and from January 2007 to January 2008, we saw that the owner owned the house at least 12 months, so that would satisfy the lender.  This poses a problem for many rehabbers as they want to typically sell a house immediately after a house is fixed up.  Another thing that lenders don’t like that makes flipping wrong, is when someone owns the property in between, that makes it a “break-in-title”.  For example if someone bought a home for $200,000 and then sold it on a contract for deed for $250,000 6 months later, but then never recorded the contract for deed, then the contract for deed owner then sold it again 6 months later to someone with financing.

You may go to the closing with the original seller selling to the end buyer, where the contract for deed person would get the $50,000 difference, but when that contract for deed buyer
bought the property, they created a “break-in-the-chain-of-title”. In that scenario the new buyer’s lender wouldn’t have known about the contract for deed since it wasn’t recorded, that’s where lenders have their minimum seasoning. Lenders even have minimum seasoning requirements now for refinancing a property for more money.  Seasoning rules in today’s real estate market has really changed the game a lot. You almost need to hold onto the property long term, then sell, or at least 1 year. I have heard of lenders that will let a new buyer buy with only 1 day of seasoning, but it’s rare. 1 day of seasoning is more likely with a very strong borrower, with more assets, higher credit score and more money down. Just remember just about any change in ownership , that would get recorded in the county records would start the time clock over on seasoning. I have seen many rehabbers leave the business and seasoning is just 1 of the reasons.  Please research the lenders to find out what each lenders seasoning requirements are.

Please email any questions you have about real estate at anytime to Ron@minnesotainvestors.com  any other questions, I will help answer questions for the person as a contest, whoever adds the most links/description/reviews per day that link to this blog, posted on any of the following social networking site list: Blogs/Forums/Discussions Boards/Social bookmarking/RSS feed/Social Networking sites will be great:
List 1  List 2  List 3  List 4  List 5  Link 6

BookMark, Email, or Subscribe This Page, Tell Friends!

Close this WindowBookmark and Share This Page

Save to Browser Favorites

Ask backflip blinklist BlogBookmark Bloglines BlogMarks Blogsvine BUMPzee! CiteULike co.mments Connotea del.icio.us

DotNetKicks Digg diigo dropjack.com dzone Facebook Fark Faves Feed Me Links Friendsite folkd.com Furl

Google Hugg Jeqq Kaboodle linkaGoGo LinksMarker Ma.gnolia Mister Wong Mixx MySpace MyWeb Netvouz

Newsvine PlugIM popcurrent Propeller Reddit Rojo Segnalo Shoutwire Simpy sk*rt Slashdot Sphere

Sphinn Spurl.net Squidoo StumbleUpon Technorati ThisNext Webride Windows Live Yahoo!

Email This to a Friend

Copy HTML: 

If you like this then please subscribe to the RSS Feed or Email Feed.

Powered by Bookmarkify™

More »